WASHINGTON, D.C., Dec. 23—The International Finance Corporation (IFC) has made a US$3 million investment in the Kula und, the first venture capital investment fund established for the Pacific Island countries.
Incorporated in Vanuatu as a 10-year closed-end venture capital fund, the Kula Fund will make equity and quasi-equity investments in medium-sized private companies, including business start-ups and expansions as well as privatization and rehabilitation projects. The majority of investments are expected to be in Papua New Guinea and Fiji.
The Kula Fund recently closed at US$16.9 million, of which US$5.4 million was subscribed to by the Commonwealth Development Corporation (CDC), US$3 million by the Asian Development Bank, US$3 million by IFC, US$2.5 million by the Fiji National Provident Fund, US$2 million by the European Investment Bank, and US$1 million by Proparco. As sponsor and promoter of the fund, CDC has established a wholly owned fund management company, Pacific Capital Partners, which is incorporated in Vanuatu and has offices in Papua New Guinea and Fiji.
"The Kula Fund will provide risk capital to businesses that have limited access to equity finance and will promote indigenous capital market structures in the Pacific Island countries," said Mr. Javed Hamid, Director of IFC's Asia I Department. "It will also help to develop the region's fund management industry. In the long run, the nascent Fiji and Papua New Guinea stock exchanges may evolve around Kula Fund-supported listings."
IFC has been active in promoting private sector development in the Pacific, notably establishing the South Pacific Project Facility (SPPF), in 1990, to provide advisory services to entrepreneurs of small and medium sized enterprises. In 1995, the Corporation set up the Pacific Islands Investment Facility (PIIF) to provide limited quasi-equity financing to complement SPPF activities. The Kula Fund is expected to complement both SPPF and PIIF.
The name "Kula" was chosen for its significance in the Pacific Islands. In Polynesia, the feathers of the lory bird, known as the Kula, are a symbol of wealth and power and, in Melanesia, the Kula ring is part of a traditional trade and barter system.
IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
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